Lendingtree Inc (TREE) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Tree.com's Third Quarter Financial Earnings Conference Call for 2014. At this time, all participants are in a listen-only. Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to introduce your host for today's call, Alex Mandel, Chief Financial Officer. Sir, you may begin.

Thanks, operator, and thanks to everyone for joining us today for Tree.com's Third Quarter 2014 Earnings Conference Call. First, a brief disclaimer. During this call, we may discuss Tree.com's plans, expectations, outlook or forecasts for future performance. These forward-looking statements are typically preceded by words, such as we expect, we believe, we anticipate, we are looking to or other similar statements. These forward-looking statements are subject to risks and uncertainties, and Tree.com's actual results could differ materially from the views expressed today. Many, but not all of the risks we face are described in Tree.com's periodic reports filed with the SEC.

On this call, we will discuss a number of non-GAAP measures and I refer you to today's press release available on our website at investor-relations.tree.com for the comparable GAAP measures definitions and full reconciliations of non-GAAP measures to GAAP. In mortgage, the operating environment continued to be a tough one with industry originations down 31% year-over-year relative to that our mortgage products revenue in the quarter was down 3% year-over-year to $32 million implying relative outperformance and continued share gains in the challenging market. In the quarter, we undertook a lead quality initiative with the objectives are improving lender conversions from our lead and maximizing our variable marketing margin.

We did so by pulling back on certain marketing sources of lower quality volume and while we don't typically unpack monthly performance within the quarter. It's worth noting that two of those three months we're flattish on a year-over-year basis. And importantly, within the quarter, we saw sequential top line improvements month-over-month which continued into October. In terms of operating metrics while our volume of leads was down in Q3 versus Q2 relative to our quality initiatives, monetization overall improved in the quarter from the perspective of overall revenue per lead. As we think about our market opportunity in mortgage while industry headwinds were very real in Q3, we have been actively developing new innovative, lead-delivery solutions and other product enhancements that are enabling us to extend our offering into segments of the mortgage lender market that we have not previously served in a meaningful way.

Over time we believe that it can open up significant growth opportunities for our mortgage business. However, in the more immediate term trend, we anticipate that our core mortgage business can achieve low to mid single-digit top line growth over the next few quarters. Shifting to our non-mortgage products, which emerged as a new growth engine in Q4 of last year they continue to demonstrate strong growth year-over-year up by 111% in Q3 to a record $9.3 million in the quarter. This marks the third consecutive quarter of a triple-digit year-over-year growth and our non-mortgage products revenue now comprises a record 23% of total revenue, up from 12% in the year ago quarter.

Inside of that portfolio revenue streams, we had near unanimous participation with every one of our non-mortgage lending revenue streams up significantly and two of our three vertical base businesses growing year-over-year. In particular and Dough will touch upon this further, our personal loans business continued to grow rapidly and achieve notable scale. After surpassing $1 million of revenue for the first time in July, in the month of October we exceeded $1.9 million in revenue. Moreover October's result is up approximately 10-fold from earlier in this calendar year.

We believe this progress validates our strategic focus over the last 12 to 18 months on extending the application of the LendingTree brand across a highly strategic and relevant set of lending categories and partnering with the high quality group of leading lenders across the traditional, specialty and alternative lending landscape. Looking ahead, we anticipate strong growth to continue in our non-mortgage revenues. However, we would clearly caution against anticipating that trend to maintain the kinds of growth rates we've experienced recently as the business achieved greater scale. All-in, consolidated revenue of $41.3 million in Q3 was up 11% over Q3 2013, falling squarely within our prior guidance.

From a profitability standpoint, the company achieved a record $16.7 million of variable marketing margin towards the high end of our guidance range. As a percentage of revenue, VMM of 40% in the quarter was consistent with last year's Q3, an improvement from the first half of this year. Adjusted EBITDA of $5.8 million in the quarter came in towards the high end of our guidance range and represented a margin of 14%. Our adjusted net income from continuing operations, which is reconciled in our earnings release and which excludes certain amounts expense under GAAP, as well as certain one-time items was $4.9 million or $0.41 per diluted share.

This metric reflects the favorable tax profile of our Company presently. Relative to NOLs and certain other tax attributes, we do not anticipate the company will pay taxes at normalized rates prior to 2017, although it may be subject to certain state taxes and federal AMT taxes in the interim. From a balance sheet perspective, our unrestricted cash ended quarter at $83.6 million and our working capital position, which we calculate as current assets inclusive of unrestricted and restricted cash minus current liabilities, including loan loss reserves was $63.4 million at September 30, up slightly from $63.1 million at June 30, our stock buyback program was active in the quarter under which we repurchased close to 39,000 shares for approximately $1 million.

In sum, while our mortgage momentum has dissipated, this year, we remain confident in the longer-term outlook for this business and meantime new growth engines in our non-mortgage lending businesses, which we have been investing and are demonstrating real traction and achieving scale. Our results for the quarter were in line with prior guidance, and as Doug will share, we've raised our outlook for the remainder of the year.

I'll now turn to Doug for his comments.

Thanks, Alex. And thank you for everyone for joining the call today. With Alex having discussed our financial results for the quarter, I'd like to spend some time sharing my perspective on our Q3 results and how this will translate into Q4 and next year. I'll address mortgage, non-mortgage some early data from our recent My LendingTree launch and then our guidance. Looking first at mortgage industry wide mortgage originations were down 27% in the same year-over-year period. While our revenue from the quarter was down 3%. It significantly outpaced the overall mortgage market. As we've discussed in the past, we don't focus on top line revenue. We focus on variable marketing margin, which many of you tracking other Internet companies would think of as net revenue or revenue less traffic acquisition costs or TAC.

There are several initiatives we undertook in Q3 that helped us to achieve record VMM and I'd like to touch on those with you. First, we had 25 new net mortgage lenders to the network. We're continuing to focus on areas where we don't currently have lender coverage and are excited to see more lenders playing and purchase and more lenders taking wider segments of customers as regulatory fears abate, housing values move up and lenders are able to sell more on agency loans end of the secondary market. Second, given our focus on VMM, we took a hard look at several marketing partners and eliminated lower intent marketing channels that lenders have trouble converting.

While we could keep those marketing partners on board and increase revenue, in the mortgage environment we faced in Q3, it made more sense to ensure our lenders received great volume, which help them to increase conversion rates and as higher unit economics on mortgage than we had previously. The result was a revenue increase of $7 per refinance customer from Q2 to Q3. This higher revenue per customer is not only a proof point that we can still increase the unit economics of our mortgage business, but also it's continuing in October and as long as we maintain our focus on lender profitability and conversion rates, this should really help us going forward.

Third, we managed to supply and demand of our marketplace better as we see take continued strides to improve automation and analytics. As I mentioned with these initiatives now implemented, we're seeing increased revenue per customer seeing stable or increased lender profitability and increased capacity with new and existing lenders, which helps us in Q4 and beyond. This is the way we manage our business every day, and the reason we can add value to lenders, connect new lenders to the network and maximize our own profitability. Moving into non-mortgage products, I'm even more thrilled with our progress here. We are sitting with the dominant brand in the category-moving online rapidly with a marketplace business model that add significant value to lenders and consumers.

For lenders who are applying significant credit scoring, innovation and Process Automation Lending, Tree is a very efficient marketing channel. And as you can see from companies that are filed publicly, borrower acquisition is there most costly exercise. For consumers loans are a natural product to comparison shop for and Lending Tree is clearly the dominant brand in the industry to help them. While personal loans are getting a lot of very deserved attention right now from the same dynamics hold true for other categories, particularly in small business lending, student loan refinancing and even spreading to new models in mortgage and auto lending. In summary, we're able to create a true marketplace for consumers and lending partners that benefits them, and clearly us.

Additionally, there is a massive shift from offline to online and a true marketplace is needed to provide transparency and choice for consumers and the ability to target consumers at scale for lenders focused on a particular set of underwriting criteria. This shift from offline to online is very early, these lending categories are still dominated by large offline lenders. Now that lenders are online and lending with new technology and acceptable revenue, we can profitably spend marketing dollars to help drive the shift to online. Let me highlight a couple of initiatives in the non-mortgage categories that I think are important to mention.

In personal loans, we continue to add new lenders and have a very robust pipeline, these lenders are a mix of both established offline company's, rapidly moving online and the pure online companies that have received so much press and focus recently. In small business loans, we've been in the beta launch with five lenders and have just now begun the paid marketing to drive this business even more. In auto lending, we increased revenues and adjusted EBITDA, 86% and 53% in Q3 year-over-year respectively. And just yesterday, we launched a student loan refinance business. It's early but through a partner we have four lenders participating in this marketplace. This product is an enormous opportunity.

There are over $1 trillion of student loans outstanding in the U.S. and we estimate that roughly 30% of them can benefit from refinancing. The next major initiative, we've launched just three and half months ago is My LendingTree. I promised all of you on our last call I'd give you some more data on this call. To reiterate our strategy here, we intend to use this personalization platform to be able to send alerts and recommendations across any loan category to consumers whenever they can save money. We think this is a radical improvement to the LendingTree marketplace model for lenders because, we can dramatically increasing their productivity through conversion rate improvements and it's also significantly better for consumers, because they'll never need to think about whether to apply for a loan wondering whether or not they can save money.

Furthermore, by incorporating credit scores, we can not only make personalized recommendations, but we can overtime help consumers understand and improve their credit scores and thus improve their borrowing costs even more so. The early alerts are for homeowners who can refinance or people who can consolidate high interest credit card debt with student loans. Over time our alerts and recommendations will get smarter and smarter. Moving onto the My LendingTree strategy, we're thrilled with the early results of My LendingTree. While we're not giving extremely detailed data due to competitive concerns, I'll give you some metrics of our early days as well as some initiatives we've accomplished and we're currently working on.

For the first 50 days following our launch, we generated volume for My LendingTree through opt-ins on our core lending products, and it's been outstanding. We're seeing solid and increasing opt-ins. Let's face it, asking a consumer, if you want to get a free credit score and then alerts to save you money isn't a very tough sell. We've generated over 200,000 new accounts since its launch and the number of accounts per day is continuing to rise. We've just begun paid online marketing targeting free credit scores, specifically two weeks ago. The results are very promising. Consumers are saying yes and we're improving the customer acquisition economics almost daily, which we expect to continue.

I won't give specific numbers on acquisition cost, but it's beating our expectations and we're now going to continue to scale. We're about halfway through the development of new TV spots, to support My LendingTree. The scripts are terrific and given the current rate performance we're seeing, we are going to accelerate the production of those spots into Q4. On monetization, we're seeing very solid engagement with this products both site logins and responses to alerts. Even at these early days, we see revenue per user moving up over time as the members enrolled and getting more alerts. We believe that as the opt-in by consumer increases our offers and alerts improve, we have alerts for more product and we rapidly learn the marketing of this product, our monetization is so strong that we think we can payback the marketing spend in a couple of months. And the loans that we facilitate for any given consumer for the rest of his or her life are almost pure profit.

In summary, we feel even more certain My LendingTree is going to deliver the first personalized marketplace for loans to consumers that will solve the age-old problem of overcoming marketing costs in a category where consumer transactions are infrequent. This was the original vision of LendingTree 18 years ago and while it took a long time, it's coming to fruition. With that context in hand, I'd like to provide our expectations for the rest of the year and provide some color on 2015.

For top line revenue, we are increasing our full-year 2014 outlook to $164 million to $166 million from our previous guidance of $160.1 million to $164.3 million, which represents a year-over-year growth at the 18% to 19%. We anticipate variable marketing margin for 2014, to be $63 million to $65 million and we are increasing our guidance for full-year adjusted EBITDA to $20.5 million to $21.5 million, up from $20 million to $21 million. Like previous quarters, when we've got quote good news, we balanced increasing our earnings and also accelerating product development and marketing initiatives for future growth. For 2015, we're breaking with tradition this year and not giving detailed full year 2015 guidance on our Q3 call.

We'd like to see the current trends in our initiatives play out for a couple of more months and give a more specific picture near the end of the year or early 2015. But what I can tell you is this. First, we expect that will continue to see double-digit revenue and EBITDA growth. We think that's very easy for us to achieve. More importantly, there'll be no change in our operating posture. We will deliver very solid top and bottom line growth and still invest in product and marketing where it financially makes sense. And we've got solid insight into the returns of those expenditures. We frankly, think it is very important to show investors that we can deliver profits now and accurately forecast them going forward.

We have always operated by balancing short and long-term results and also in revenues and profits. Any company can view the top line at the expense of the bottom line and any company can squeeze cost to hit the bottom line at the expense of growth and improving our user experience, but great companies can do both and we want to be a great company. In summary, we're executing across the board, we've got fantastic liquidity and dry powder to do sensible acquisitions and attractive organic investments, a world-class marketing machine that can leverage our brand to more efficiently acquire customers through paid channels than any of our competitors, better monetization in most categories due to our brand and high intent customers we drive, and a diversified product mix in new categories that are growing in transitioning online, and we've got what I think is a world-class team of people executing everyday around a model where we push ourselves to simultaneously have great returns to shareholders through increased profits compared to any of our competitors and still sensibly invest in the future, continuously improve the customer experience, which increases volume our company would help to continue to pay marketing, and a relentless focus on the profitability of our lender partners.

As a company, we take our role of stewards of your trust in us by investing in our company, very, very seriously. Your Board of Directors, and your CEO are substantial shareholder and have a history of running businesses in this manner and our entire team believes that the challenge of capturing significant share and growth while simultaneously pushing ourselves to be increasingly profitable and having a great experience for consumers and lenders is an interesting and sustainable exercise, it's much more interesting than having profits at the expense of revenues or revenue at the expense of profits. Given the macro trends of the offline to online shift, the return to normalcy in the consumer credit markets, our brand and our execution over 18 years, we're both incredibly energized and incredibly optimistic.

With that, we'd love to take your questions.

Thank you. (Operator Instructions) Kerry Rice, Needham & Company.

Couple of questions around maybe the newer products. So starting with My LendingTree, you mentioned you had 200,000 consumers over the first, I think 50 days, is there any trend you could point out there, what products you find that they are looking at and maybe are they coming back multiple times even within those 50 days? And then the second question is, personal loans, I think, we know that's a great opportunity. You mentioned some of the new opportunities, small businesses, autos, student loan refi, would you characterize any one of those as maybe kind of the next a big grower for the company, or they are too small to kind of start to differentiate right there?

First on the My LendingTree trends, we've added over 200,000 people in 50 days. We're adding thousands a day. As I said, they're coming in through the traditional in our products of LendingTree mortgage auto, home equity, et cetera and then getting the option to opt in to this and we're growing the opt-ins. The neat thing that we're seeing is, as I said, the marketing, what we expect the marketing cost to be is going back over about three months, which is great. The products though are highly personalized, it really is everything. If you have somebody come in with a lousy credit score and with a bunch of high interest, credit cards, we are recommending the day consolidate those into a personal loan and they can save money and increase their credit score. At the same time, if somebody came in for an auto loan and they told us they're a homeowner and they can refinance at a lower rate, we're recommending refinance to them. And the early results -- it really is across the board. And that's exactly what we wanted, which is exactly personalized in customer and customized for each individual. And yes, we're seeing them come back multiple times. Obviously, there is a range and so the numbers I'm talking about are averages. But, some people opt-in and don't come back and some people are there, all the time. The product itself is great. I'm on it myself, and we're enjoying it and it's going to continue to improve.

We're just thrilled with it. Outside of personal on the new things, what I would say it will completely dependent on two things, to really understand our business you have to understand that if lenders want to lend money and consumers want to borrow it and you can get an effective online experience that can make the economics work for the lender that's going to be the next growth engine. Personal loans became a growth engine even though it's been on our site forever, because we had a very focused effort across product, across sales and even across finance, Alex himself, went on a number of sales calls and they have had an introductions to capitalize on the fact that new lenders were coming into the space. And we made the product experience better et cetera. And if they haven't -- if they can pay us enough to generate customers, which they can and bid up the value of our customer introductions, then we can afford to go drive the marketing. And now with My LendingTree we obviously don't need to drive marketing. So it's going to depend on where the lenders are. I think in small business, it's a challenge, but it's not an insurmountable challenge, there is certain in small business lending, there is everything from unsecured loans to secured loans to in our cash advances and some of those products are more routine and some of those products are more specialized but I think, there are companies succeeding there and then I think we can too.

And particularly entering the student loan refinance business I work. As I said, we're seeing 30% of the people in my LendingTree actually have student loans, it's hitting a younger demographic than I probably would have seen and I think there is, there is real opportunity there, and those are really easy to refinance. And in small business, the thing about -- I'll go back to small business, we've already got all the -- most of the high-profile sort of a new online lenders on the marketplace, and we've already closed loans. So it's definitely working albeit early days, but I think those two are great opportunities. I also think there is opportunity in auto. The direct auto business has been a very tough nut to crack since we started LendingTree because most people finance at dealers, but there are some innovative models coming out with new companies and we think there is, there could be a great opportunity there, too.

So maybe just one follow up, if I may. Although early and you're just starting some of page marketing, how do you think about the margin profile of maybe the my LendingTree and some of these new businesses or maybe the ultimate impact on margins for the overall company from these new businesses?

So I won't make it easy on you and give you a specific numbers, but I can tell you have broadly, how we think about it. First, we focus on Variable Margin Dollars not variable margin percentage and that's an important thing. So we might have a given marketing dealer or given marketing partner that operates at 10% margin is one that operates in 80% margin and if we got another 10% margin one, it was incremental but put dollars the bottom line we do it all day long. And so we don't focus on margin percentages. I can say that these new businesses or higher even margin percentages then some of the other ones, which will likely come down over time as they mature.

But that doesn't scare us again, because again we're focused on the dollars and the beauty of our marketing machine that we created which was sort of step two in our transformation is the fact that leveraging the brand and then applying the science of really smart people and great online marketers that we can flood the zone or market more competitively than our competitors can. I was thrilled for example, if you go to Yahoo Homes today, you'll see a rate table there that used to be powered by a competitor that's now powered by LendingTree. That happened because our monetization increase in mortgage in that instance and we were able to go get a deal and that syndication strategy is can play out across the rest of them. So today are higher margin percentages, but I'd like to see it go down over time quite frankly, as the dollar is increased. The beauty of my LendingTree and the beauty of our business in general is you can start to add, you can start to get a real flywheel effect.

So for example if you have somebody coming in for let's say a personal loan, and we can acquire them in a certain cost, but then we can add an additional amount of expected value by expectations of future business that enables us to sort of raise our marketing bogie, still maintain the same margin percentages, but spend more and invest more in marketing. So I joke with our product team, all the time that they are their goal was to put paid marketing out of the business of LendingTree but at the same time, you know what, if paid marketing's profitable, we'll continue to do it.

John Campbell, Stephens Inc.

The first is housekeeping, Alex what are the 4Q 2013 basis for mortgage and non-mortgage rev, I think has shifted a bit year-over-year.

I'm sorry, can you please repeat the question the 4Q, did you say basis?

Yes, the base for rev for 4Q 2013.

I think we were at $36.4 million in Q4 2013, that was $31.7 million of mortgage products and $4.7 million of non-mortgage.

And then on the non-mortgage sort of business, is there any seasonality there that might call rather decline on a sequential basis or should we expect this kind of natural step up there?

I think that this will be part of our learning experience in these newer products this year. I think that there are theoretical arguments that cut both ways. But in particular with some of the newer alternative lenders and the growth trajectories they've been experiencing and how that has benefited some of the traditional and specialty lenders, it could well be that financial markets factors outweigh seasonal factors. So I think it's just part of our learning curve and that's in part why indicated that would like to wait until a little bit later this year or early next year give forward-looking guidance for 2015.

And to just add on to that. Typically, what you saw when we were concentrated in mortgage is in Q4, consumers are generally not borrowing and lenders generally are going on vacation and ad rates go up with the advent of retail and holiday shopping, which causes some -- which makes it sensible -- all of which makes it sensible for us to pull back on marketing. However, this year I think the advent of both lenders that are really looking to add volume and paying us for it, plus the fact that we're getting this I think secular share from offline to online.

And importantly, the fact that now My LendingTree is starting to generate real inquiries for new loans, which for the first time in LendingTree's history, it's incredible. We're not sitting here going what's the revenue of the mortgage customer and what's the cost to get them, and then just trying to increase one and decrease other, but we're actually seeing lifetime value and a great customer experience and people coming back again and again. So I think that's going to help as well too to buffer what would normally be the seasonal business in Q4.

And then so you guys came in pretty far ahead of us on the adjusted EBITDA margin, so could you talk a little bit about some of just a little bit more about the cost initiatives going on in mortgage. I know you guys don't break this as specifically, but can you talk about, the margin uplift in mortgage for 3Q? And then just generally speaking, how the reduced traffic going forward it's kind of impact margin profile?

Let me talk about it globally and then Alex can maybe hit some specific names. The important thing is that what we do every quarter as we try to have more every day is maximize VMM dollar and sometimes if there's huge demand for volume from lenders and it's really easy to underwrite them, and the consumers and sort of anybody can get a loan, the right answer broadly speaking in an environment is to step on the gas to drive massive quantities of lender of consumers and do that.

The flip side is there are some times when rates are variable or when lenders are kind of paring back or et cetera, the environment changes all the time when you're better outstanding quality and this was clearly an experiment I would call it in quality to say if we improved conversion rates, could we get increased revenue per user and the answer was, yes. What that informs is something though, and we did that on the marketing side. The most important thing for our company going forward is we're going to have massive focus on innovation. Even in mortgage around conversion rate improvements. I can even say that with our personal loan lenders.

They started off at conversion rates that were roughly one-quarter of where they are today. And we were able to work with them on the technology, the interface between them, the messaging to the consumer, even the rates that they offer on the site and through that we help lenders increase conversion rate. I liken it to the -- now I realize the early days of Google search when Google would show up at our doorsteps seemingly regularly and buy our marketing people lunch and introduce us to other technology partners and help us increase our conversion rates of Google. On Google with our marketing because what it we do, we took the increased returns and we pumped them right back into Google so we can grow our business on search and that's effectively what we're doing across all categories in the lending side. Alex you want to add anything there.

No, I think what you start about the quality initiatives as well in that you can drive more volume and improve your top line, while that comes in at a much lower margins and so you can blend your overall margin down. And we took the opposite approach.

And financially, I think the key thing to take away from that question I think is one, it's variable margin dollars, and two, conversion rates matter, because anytime we can help a lender and convert more customers, it's making them more efficient and reducing their cost of originating a customer. It's interesting from time-to-time, I just told our company yesterday we're going to banish the word lead, because every now and then we'll talk about leads are customers and we're not sell in leads like someone other people in our space are. We're helping lenders originate new customers at levels that meet their goals.

And ultimately with that focus, that's what we do. We are delivering strategic growth solutions to them or we can walk into a shop and get their credit profiles, that they are looking to originate and we can say we can deliver you X more loans in every month or every year and here is what that means to your bottom line. And that's just like I said, free credit score is a pretty easy sell, that's a pretty good sell to a lender.

Okay that makes sense. Thanks for that color, Doug. And then last question from me. And you guys did about a million or so worth of stock in the quarter. Obviously, looks like a good sign to us, but can you give us an idea of what part of the quarter that occurred. I mean the stock was soft in the client in early July, but was up pretty sharply the rest the quarter.

We don't give out that kind of information what we do every quarter is put a plan in place and then hand it off to somebody and put it on autopilot and we did that. We're pleased with the results. We're going to maintain posture going forward, we think there is a lot of long-term opportunity here and we're going to maintain that posture going forward.

Howard Rosencrans, BA.

Congratulations on a great quarter, sounds like the momentum is incredible. In terms of the My LendingTree, that's feeding into both sides of the equation, if I understand it, the mortgage side and the non-mortgage side?

Yes, just to reiterate, My LendingTree is essentially an alert mechanism where a consumer gives alert both once to see their free credit report, credit score, and because of that we have the permission to access their credit data and we can then with that data and other data that they provider, we can get from third parties, we can send them alerts. So as I said on the call you might come in for an auto loan, but we've see that you've got $20,000 with high interest credit card debt, and we can recommend a great deal on personal loan, or you might come in for a new credit card and we see that you are a homeowner and can save a couple hundred bucks a month on your mortgage and we're just going to let you know.

It's a great user experience, it's really what we always focus on is surprising and delighting customers, and when somebody gets an e-mail that says hey, you want to save 100 bucks in your mortgage, and it's not a random spam, but it's actually no, because this is the lender and here's how we're going to with the lender and here's how we are going to do it. It's a great deal, plus, you don't need to -- I mean it's free, but you also don't need to go fill out the form again. We've got information from your credit report. We've using now for the first time and way too long. The information that we already have, that you've given us previously, and can the form fill out experience much easier. And we've already checked the pricing against the data we have, so we can be very firm and in what we're actually offering you. We're actually saying, hey, this loan is available you're going to save money. Do you want it or not, and you make the decision.

To follow on in non-related question or somewhat related question, the monster driver on the non-mortgage on the consumer loans or prosper -- I'm blank having even bigger player who's about to come public, in that business, if you could give us some color as to how big you see the opportunity with these guys, how hard they are pressing you to find people, who want to take out loans? Then my final question is, with all your success in this My LendingTree, how easy do you think it will be for competitors to knock you off? Thank you.

Yes. You mentioned a couple of names and I can tell you, there are a lot of others. And that's what's really interesting about it because while we love the innovation of the Internet companies or the Internet lenders that are in this business, we've seen a lot of innovation and success by traditional guys. And while I can't really talk about names or I'm not exactly sure who I can talk about based on which contract et cetera, the largest players in the space are on here. We have 11 lenders and they range from very big, quote unquote traditional in some instance branch-based companies to Internet up starts that are literally starting up, and similar to what Google saw when start ups would do at SEM through Google, they're effectively doing SEM through us.

They're not, so it's both through the traditional guys, specialty lenders and then what I would call the alternative lenders, or the Internet guys. And the nice thing is there is more and more of them starting up every day. The technology to underwrite and service, and things like that are fantastic, and they are coming along and lenders can do it, but you'd be surprised who some of our biggest guys are. One for example AvantCredit in Chicago, which not lot of people know about, but has a fantastic profits to service consumers and they're in there competing with the guys you mentioned and many others and doing a fantastic job.

And we see it as an opportunity, not just for individual lender but also to grow the category consumers want to comparison shop and the neat thing we have said and we've put some press release out about this, they actually save money by doing this because different lenders have a different take on the market, but at the same time we're a more efficient marketing channel for these guys to originate volume and what they can do it through direct mail or go try to, go on search, or do display advertising or all the great things that we've cut our teeth on, marketing on the Internet for the last eight --.

And the ability of others to knock off what you guys are doing?

Look, you can always create a marketplace, right. And there are others and there have been others looking over the years in mortgage. I was talking to somebody the other day. We've had Microsoft compete against us, we've had Google compete against us, we've had Yahoo compete against us, we've had many public companies compete against us and we've had many fade away. And as long as we focus on making sure that we're adding value to the consumer and adding real value to the lender, our brand then carries us in both of those areas. And we've talked about this many times, the fact that we've got a better brand means that we're more likely on the consumer side to have people click on ads, trust us, give us information that makes us able to market more effectively and the fact that we've got a brand in the lender community where they count on us, that we're not going to pull a bunch of games, which some competitors have done and we're going to deliver consistent volume at profitable levels for them.

And we're going to work in partnership to improve them. That starts to reinforce each other and then that increased monetization from lenders helps us go and do with consumers and then helps us go syndicate. I mean anybody can sell books online, but Amazon really does it incredibly well and like a lots of people build a search engine, but Google really focused on making it better for the consumer and better for the advertiser and that creates a marketplace that reinforces itself and that's what we're aiming to do in the category of consumer lending, which is a pretty darn big category.

Josh Goldberg, G2 Investment Partners.

Just wanted to ask couple of questions. I guess first obviously with companies like Credit Karma and others at $1 billion or more valuations and lending clubs going public, what do you think, may be $5 billion valuation. A company of $500 million, you're only half way to being the next billion-dollar Internet company. My questions is what are we going to do to get the company from where we are today to that next level?

So I think I comment on this, and I think you guys have known me a long time. We want to be built to last and here for a long time, as we have been and over time, the market is going to judge what the market's going to judge. We're obviously very bullish about what we're doing and we're just keep getting the word out and let the results speak for themselves. So, we think with increased marketing albeit very profitable marketing unlike what some other people do, we think that will certainly help and we think we're going to continue to add lenders in the marketplace, and we're going to continue to innovate on the product. And what I've seen over the last few years, as our stock has admittedly done well from valuations that we're probably even more insanely low, than they are today, we've done that by consistent execution and by telling people, what we're going to do and then delivering on it and quite frankly, based on some of the results I've seen from people.

It seems like investors are starting to value that, to get growth, but also have profitability. And as I said before, it would be easy for me to sit here and say we're just going to ditch earnings and go for growth. That's I think irresponsible and it's not in our DNA. And we never wanted to that, but we're going to do it by innovating for the consumer, making the product better at increasing conversion rates from lenders and building on our brand to continue to market better and I think in that also my LendingTree really matters. I'm not one to comment on the valuations of others. Obviously, that's for the market to decide. We think, as we use get comped against some of the real estate high flyers, but we're going to put up the revenue growth rate and earnings growth rates, they are at the top tier of our category and we're going to let guys like you figure out what that's worth.

Doug, obviously, can you just talk a little bit about the fourth quarter. Obviously not seeing the seasonal downturn, do you usually see what's driving the near term strength?

So I think it's several things. It's clearly seasonality and more, it's way more pronounced in mortgage than other categories. Now if you can go online and if your Christmas shopping and your credit cards are maxed out, you want to consolidate your debt and with a few mouse clicks and 24 hours, you've got 10 grand on average in your account and it's saving money every month, that's an easy thing to do. It's a big difference than saying hey, maybe I'll re-financed my mortgage and spend the next 30 days pulling out forms and getting while I'm trying to do my holiday shopping and do that, why don't I put that off till January.

So I think it's all the same things true in auto refinance which is true, and I think be it'd true in student loan refinance. The beauty of what's happening right now is that the advent of technology is finally making it easy for people to actually get a loan at a good rate and with LendingTree to comparison shop and we're making that happen. So I think it's not a mortgage, but even in mortgage that's getting a little easier too, and rates are obviously pretty good. So it's really that plus it's My LendingTree. I can't tell you today what the specific numbers are, but we are seeing real repeat business that is materially impacting the product lines of auto loans and personal loans. And we expect it will do the same things with student loans and it's impacting mortgage too. So the fact that we can get volume for free because the consumer has said, hey, yes, if you can save me money, save me money, that means we don't need to go out there and buy advertising up against target on TV or AOL.

Last from me and really great results. If I look at your preliminary numbers for next year, I assume that you're now mortgage business will grow faster as you said your mortgage business will be roughly three mid-single digit growth. It would seem like you should grow your EBITDA roughly in line or faster than your revenue with that kind of mix shift going in your direction.

Yes, I'd have to go -- I don't want to get into 2015 guidance here, I'd definitely agree with you that non-mortgage will grow faster than mortgage, the margins are very good there. And I want to see that My LendingTree stuff play out. I say it almost every quarter that this is the most optimistic I've ever been and I keep thinking max out of my optimism, but I keep getting more and more optimistic and more and more energized. So it's great to see when you're both executing and you're getting the secular shift from offline to online, and like it's happened in travel, and retail and everything else, I think financial services was always going to be the last big one to come online, lending in financial services.

The most difficult to execute technologically, but now that it's happening, and it's a major category offline, and lenders can be a lot more efficient online, and a marketplace is exactly the right model where lenders can target customers and they want I think quite frankly, I feel like when I talked to lenders now, I'm having conversations that I thought I was going to have naively 18 years ago when I started the company or I thought I'd be able to walk into a lender and say, hey, if I send you customer information, can you send me back instantaneous offers that consumer can click on and accept and actually close. And I thought that was going to actually be possible and it turned out it was pretty much impossible until now. But now it's actually starting to happen, and we're sitting in the right spot.

(Operator Instructions) Jim Fowler, Harvest Capital.

Just two quick questions, little kick down in the interest rates in the third quarter of mortgage numbers relative to the industry, but I'm wondering any sense that the parties whom you're working on, excuse me for calling them leads, but leads are gaining their confidence in the purchase market or is that largely reflective of a little burst of refinancing activity in the third quarter? And I've one other question.

No, the answer is no, it is not due to refinance uptick, and yes, our purchase business is continuing to grow. We caught the purchase wave early, we have quite frankly been saying to our lenders every year since probably 2002 that hey purchase is going to be right around the corner you better get ready for it. This time it actually happened, we were ahead of it with some product innovation in particular, the local lender introduction, which I've talked about before and the beautiful thing and many others. And we've got another big purchase innovation that is on the docket, that we're going to continue to work on. So, increasing purchase conversion rates for lenders is important. We've also introduced product innovation to work with nonpublic call center based lenders where we can put inbound phone calls directly to loan officers who are in the field, which we think is great.

So it's getting us into the local space. And so it's absolutely great on purchase, quite frankly, as we've shown in prior quarters. If refi ticks up, but a lot of times lenders get flooded with volume and then it doesn't hurt us. But it's sort of balances out so, now the purchase power businesses is just great and it's going to keep getting better because the key thing that's going on now is, lenders are increasing guidelines, there were some regulatory changes governing Fannie Mae and Freddie Mac, which are reducing loan buyback risk at the same time the QM rules which I won't geek out too much on mortgage got finalized and home prices are increasing so purchases is a tailwind.

Great. And then last question, any sense of what the median or average FICO score is for the credit reports that you're delivering to the My LendingTree folks?

No, and I'll get back to you guys on that. I think it actually breaks down like America, which -- I would guess I'll bet you a steak dinner that whatever the median is for America is the median for us because we're basically opting in people who are today coming through LendingTree in addition to some organic volume, but the beauty of this is it works great with high credit scores because we are going to save money and it works great for people with low credit scores, because we're going to both save the money and improve their credit scores and then save them more money.

I'm showing no further questions at this time, I would now like to turn the call back to Doug Lebda for closing remarks.

Fantastic, thank you all very much. We appreciate the interest in the company. We appreciate your intelligent and insightful questions, and your focus with us. And like I say every quarter, we're going to go back to work now and try to make it even better for next quarter. So thank you very much and we're always happy to engage with anyone who is interested.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.